Inflation

Question 1

Inflation def

Answer 1

Increase in average price of goods and services

Question 2

Deflation def

Answer 2

Decrease in average price of goods and services

Question 3

Disinflation def

Answer 3

Inflation rates decline

Question 4

How is inflation measured + equation + by who

Answer 4

CPI. Instrument that measures the cost of consumer’s market basket
CPI= market basket / benchmark market basket
By Bureau of Labor Statistics (BLS)

Question 5

Benchmark basket def

Answer 5

Year reference point

Question 6

CPI def

Answer 6

Measures price changes over time : (consumer basket / benchmark basket)

Question 7

Main compositions of CPI (5)

Answer 7

Housing, food, transportation, insurance, healthcare

Question 8

Inflation rate def

Answer 8

% change in CPI from 1 year to another

Question 9

Wealth def

Answer 9

Value of the stock of assets owned

Question 10

Consequences of inflation (2)

Answer 10

1- Loss of purchasing power
2- Wealth effect (housing & stock depreciation)

Question 11

Types of inflation (2)

Answer 11

-Demand pull
Price increase because spending increase
Too much demand, full unemployment rate

-Cost-Push
Price increase because production cost increase

Question 12

Cost-Push inflation is a result of increase in the per unit cost of production

Answer 12

True. Increase in price due to increase in price of production or expectation

Question 13

If an organisation increases their prices which triggers inflation rates, this is

Answer 13

Cost- Push inflation